Govt moves to take control of Unitech; NCLT supersedes board

NCLT asks govt to name new directors by December 20

The corporate affairs ministry has moved the National Company Law Tribunal (NCLT) seeking management control of debt-ridden real estate company Unitech on the grounds of alleged mismanagement and diversion of funds.

If the government has its way, this could be the third instance in history, after the Satyam and NSEL cases, where the government takes over the board of a company and makes efforts to turn it around. The move will help thousands of Unitech homebuyers who are yet to receive possession of their houses.  

The government can take over a company in public interest. Unitech said in a statement that any interference in the working of the current management would be detrimental to the cause of all stakeholders. 

The NCLT on Friday morning debarred all eight Unitech directors and allowed the government to appoint 10 nominee directors. Within hours, Unitech approached the tribunal contending no “coercive steps for execution” could be taken in view of a November 20 order of the Supreme Court.

The NCLT has issued notice to Unitech, directing it to file its reply, and will hear the matter on December 20. It also asked the government to furnish a list of 10 nominee directors. The tribunal said its interim ruling would be subject to compliance with Supreme Court orders.

Additional Solicitor General Sanjay Jain, appearing for the government in the NCLT, said the government had taken the decision in order to help homebuyers. 

“We want to avoid insolvency of this company, otherwise the 19,000 home buyers will be left high and dry,” Jain said. Moreover, there are around 51,000 Unitech depositors.

Experts said the new Unitech board would look at ways to help home buyers. It could either find new developers for incomplete Unitech projects or even a public sector undertaking could take them over. “It will be a decision by the new board on how they want to go about completing pending projects,” said Neeraj Sharma, director, Grant Thornton Advisory.  

News of the government taking over the Unitech board had a positive effect on the company’s stock, which rose 20 per cent during the day.

In April this year, Sanjay Chandra and Ajay Chandra, Unitech’s managing directors, were arrested by the economic offences wing of the Delhi police and were accused of duping buyers who had booked flats in a Greater Noida residential project. The buyers alleged that Unitech failed to complete the project on time and did not refund their money along with interest.

This is not Sanjay Chandra’s first brush with the law. He was earlier arrested by the Central Bureau of Investigation in relation to the 2G telecom spectrum case. Unitech had won a licence for a telecom network that was later sold to Norway-based Telenor.

Over two dozen home buyers of Unitech’s housing projects in Noida and Gurgaon had approached the National Consumer Disputes Redressal Commission after the builder had failed to give them possession of their flats on schedule. The company had promised to hand over possession of flats in 2012, but failed to meet the deadline. The forum had asked Unitech to refund the money to the home buyers with interest.

On January 12, 2017, the Supreme Court directed that Rs 2 crore deposited by Unitech Resorts with its registry be distributed among 39 homebuyers who had sought refunds in the Vista housing project in Gurgaon.Slapping a penalty on Unitech Resorts for delaying handing over of flats, the court on February 20 directed it to deposit 14 per cent interest on the Rs 16.55 crore invested by the 39 home buyers.

Also, the Consumer Disputes Redressal Commission in Chandigarh has sentenced Unitech Chairman Ramesh Chandra and his sons to three-year jail terms for not complying with the court's order. The court has issued non-bailable warrants against the trio and has slapped a fine of Rs 10,000 each. 

In the last week of March, the Supreme Court directed Unitech’s chairman and managing directors to be present in court on May 5 in connection with a petition over a proposed scheme of compromise between the company and some homebuyers. The court also asked Unitech to submit its final proposal for completion of its pending projects.

ALL IN A DAY

• NCLT accepts MCA’s application to take over Unitech
• Post-lunch, Unitech opposes any such action
• The realty firm argues the Supreme Court has disallowed action by any other forum
• The tribunal asks the ministry to suggest new directors of Unitech
• Unitech says any interference in working of current management will be detrimental to cause of all stakeholders
• The next hearing in the case is scheduled for December 20